New Panda + Samurai green bonds on the way: Egypt is planning to issue new tranches of Panda + Samurai green bonds to finance a range of sustainable development projects, a senior government source told EnterpriseAM. The sales would mark the second Panda bond issuance and third Samurai issuance for Egypt.

Where things currently stand: Talks are still ongoing for the Panda bond issuance to secure guarantees, with the government looking to pull the trigger on the issuance during the current fiscal year, according to our source. However, Egypt hopes to move ahead with the issuance during the current fiscal year. The new tranche comes as part of efforts by the Finance Ministry and the Central Bank of Egypt to diversify public debt instruments with favorable interest rates, amid a high global interest rate environment, the source added.

Things are looking good for our Panda prospects: Egypt has regularly paid the returns on its 2023 Panda bonds since their issuance, our source said. This strong track record supports the country’s ability to expand its future issuances.

REFRESHER- Egypt closed its maiden Panda bond issuance in China in October 2023, with a CNY 3.5 bn (USD 478.7 mn) issuance. The three-year securities were priced at a 3.51% annual rate, lower than the yield on USD-denominated debt. A year earlier, Egypt closed its maiden Samurai bond issuance in March 2022, when it sold JPY 60 bn (c. USD 500 mn) of the securities, while our second Samurai bond issuance hit the Japanese market in November 2023.

Samurai bonds issuance timeline takes shape: Egypt is set to take the planned issuance of Samurai green bonds to market in Japan, according to our source. The move aims to secure the country’s USD liquidity needs, alongside other diverse bond issuances. Egypt is currently awaiting approval from the African Development Bank (AfDB) for a USD 400 mn guarantee in September for the new tranche of Japanese bonds, the source noted. This backing is anticipated to provide Egypt with more competitive terms and draw in a wide base of investors.

Where are the bond proceeds going? Egypt has a lineup of sustainable projects across industries including electricity, transportation, and manufacturing, for which these bond issuances will help provide low-cost financing. The first Panda bond issuance helped Egypt finance four leading development projects, our source said, without providing further details.

ICYMI- The new public debt strategy for 2025-2030 could be released during 1Q FY 2025-2026, a senior government source told EnterpriseAM previously. The strategy aims at diversifying the country's public debt instruments and introducing new ones, seeking to secure funding with varied and more competitive interest rates.

ELSEWHERE ON THE DEBT FRONT-

Egypt hopes to be added once again to JPMorgan’s Government Bond Index-Emerging Markets by 2026, especially with the gradual improvement of the exchange rates and other crucial economic indicators, a government source told EnterpriseAM yesterday.

REMEMBER- Egypt was droppedfrom the index on 31 January, 2024 due to persistent FX shortages in the country at the time that prevented investors from repatriating returns. This was not the first time we were put back on the list, as Egypt rejoined the index in early 2022 after having been kicked out for over 10 years because of the economic turmoil following the 2011 revolution.

What’s working in our favor? We’re currently seeing significant capital inflows, making our public debt market exceptionally attractive to foreign investors due to very appealing interest rates, the source said. The Finance Ministry’s next move, according to our source, is to diversify its local public debt issuances and to focus more on bonds over treasury bills.

The JPMorgan bond index is key: Inclusion in the index would draw in fresh, longer-term capital to the local debt market, the source said. Fresh foreign appetite for EGP-dominated debt instruments would help buffer the exchange rate, reduce borrowing costs, and help curb the nation’s debt payments, the source noted.

SOUND SMART- The government is paying more this fiscal year to service our debt than it is on any other category of state spending, including health, education, and infrastructure.

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